All transactions incur an admin fee of 1-2% of the transaction value. This revenue is used to pay for competent currency administrators, to cover other necessary expenses, and above all to fund the system account that is needed to settle unpaid member debt. Settling unpaid member debt is essential for the stability of MONEY 2.0, and is therefore in the interest of all participants.
Actual transaction fees will vary, depending on administration efficiency as well as the frequency of defaults. Since it is vital to compensate for possible losses, the system account always needs to be properly funded, and transaction fees should be subject to automatic adjustments, depending on past experiences.
The system administrators enforce the rules and look into reports of possible violations. Administrators are also responsible for physically identifying new participants, which should be done face to face. To make sure the system rules can be enforced efficiently, it is recommended to restrict participation to a single area or country.
System finances must be 100% transparent. Public data include:
- income from transaction and balance fees
- amount of money that was regained from debtors
- losses due to unpaid debt
- administration costs
- other expenses
- system account balance
| << Member feedback |
Details
• Although a mutual exchange system that is run by the market participants seems charming, there are many good reasons why a serious currency needs a dedicated administrator: To keep the system secure and stable, someone must carry the risk for possible defaults and hold black sheep responsible. To accomplish that task, those who carry the responsibility must know the identity of whom they're dealing with. Although this knowledge also applies to the trade partners, they can be hardly burdened with the transaction risk: Doing so might, on the one hand, lead to an innocent seller losing the entire value of his sale (and due to the system's setup, this could happen several years later when the money is already spent - which also raises the question who inherits the responsibility if the original trade partner bows out). On the other hand, it might lead to a potential buyer not being able to purchase, due to the seller entertaining a - possibly unfounded - suspicion and not being willing to carry the risk (which would be equivalent to no currency being available in the first place). As a result, traders would have to perform background checks on all potential business partners - something for which most of them simply wouldn't have the proper resources or skills. Last but not least, market participants with exclusive trade patterns would face an imponderable risk, and would likely be forced to change their business just to fit the currency characteristics. All of the above would also create a huge disadvantage for MONEY 2.0 compared to traditional money, and greatly diminish its chances of being used in the first place.
Distributing the risk among other participants may seem like an alternative, but whoever carries the risk would also have to defend himself against possible losses - that, however, requires private information about all trade partners, and would therefore lead to huge privacy problems (not to mention the risk of some kind of lynch justice). Last but not least, there are other vital tasks - above all, reliably identifying market participants, with all related questions of liability - which participants could hardly accomplish collectively.
• Determining the currency administrators by public vote is an option, but hardly a necessity, as long as transparency and control mechanisms are in place. The actual key to a free monetary system lies in the democratization of the money issuing process (=anybody can issue money), as well as in breaking up the currency monopoly, thus allowing market participants to switch to competing currencies if they want to, or even to launch their own.
• For example, the system account's minimum coverage could be calculated by taking the average money creation limit, and multiplying it by 1/50 of participants.
• As possible sanctions, administrators can hand out public warnings, close or freeze accounts, seize assets, impose fines, raise individual transaction costs, reduce or freeze account limits, and strip accounts of their ability to affect other participants' account limits.
• For the need to identify market participants, it should be stressed that all participants in MONEY 2.0 are given the privilege to issue money. This power comes with personal responsibility, and that responsibility simply cannot survive under the mantle of anonymity.
• To ensure a smooth operation of MONEY 2.0, all participants must agree to...
...suspend the period of limitation (as in many countries, the time in which unpaid bills can be collected is only three years - given the rules of MONEY 2.0, however, payments might become due later than that).
...label all payments correctly (to keep MONEY 2.0 stable, gifts, loans and other payments that aren't backed by goods/services must be identified as such).
...cooperate with the system administrators.
...participate in the feedback system and report foul play.
• Although a mutual exchange system that is run by the market participants seems charming, there are many good reasons why a serious currency needs a dedicated administrator: To keep the system secure and stable, someone must carry the risk for possible defaults and hold black sheep responsible. To accomplish that task, those who carry the responsibility must know the identity of whom they're dealing with. Although this knowledge also applies to the trade partners, they can be hardly burdened with the transaction risk: Doing so might, on the one hand, lead to an innocent seller losing the entire value of his sale (and due to the system's setup, this could happen several years later when the money is already spent - which also raises the question who inherits the responsibility if the original trade partner bows out). On the other hand, it might lead to a potential buyer not being able to purchase, due to the seller entertaining a - possibly unfounded - suspicion and not being willing to carry the risk (which would be equivalent to no currency being available in the first place). As a result, traders would have to perform background checks on all potential business partners - something for which most of them simply wouldn't have the proper resources or skills. Last but not least, market participants with exclusive trade patterns would face an imponderable risk, and would likely be forced to change their business just to fit the currency characteristics. All of the above would also create a huge disadvantage for MONEY 2.0 compared to traditional money, and greatly diminish its chances of being used in the first place.
Distributing the risk among other participants may seem like an alternative, but whoever carries the risk would also have to defend himself against possible losses - that, however, requires private information about all trade partners, and would therefore lead to huge privacy problems (not to mention the risk of some kind of lynch justice). Last but not least, there are other vital tasks - above all, reliably identifying market participants, with all related questions of liability - which participants could hardly accomplish collectively.
• Determining the currency administrators by public vote is an option, but hardly a necessity, as long as transparency and control mechanisms are in place. The actual key to a free monetary system lies in the democratization of the money issuing process (=anybody can issue money), as well as in breaking up the currency monopoly, thus allowing market participants to switch to competing currencies if they want to, or even to launch their own.
• For example, the system account's minimum coverage could be calculated by taking the average money creation limit, and multiplying it by 1/50 of participants.
• As possible sanctions, administrators can hand out public warnings, close or freeze accounts, seize assets, impose fines, raise individual transaction costs, reduce or freeze account limits, and strip accounts of their ability to affect other participants' account limits.
• For the need to identify market participants, it should be stressed that all participants in MONEY 2.0 are given the privilege to issue money. This power comes with personal responsibility, and that responsibility simply cannot survive under the mantle of anonymity.
• To ensure a smooth operation of MONEY 2.0, all participants must agree to...
...suspend the period of limitation (as in many countries, the time in which unpaid bills can be collected is only three years - given the rules of MONEY 2.0, however, payments might become due later than that).
...label all payments correctly (to keep MONEY 2.0 stable, gifts, loans and other payments that aren't backed by goods/services must be identified as such).
...cooperate with the system administrators.
...participate in the feedback system and report foul play.